Hello:
I haven't actually taken any course on backtesting… neverteless I know that what it means is that historical data needs to be tested for a particular strategy and see if it worked before… given the same conditions for that strategy…
Now I wonder… now many times does the strategy needs to work in order to be acceptable as a profitable strategy?? let's suppose a particular strategy worked 83% of the time (under the same conditions of course) when it was tested let`s suppose over a 1000 different times… can that be considered as a profitable strategy??? why?? why not??
if not how much % does it need to be?? and what is the criteria for that porcentage??
thanks
Hello Ghery, it looks like you are referring to the hit rate. Hit rate can't just be a criterion to analyse the performance of a strategy.
Metrics such as cumulative returns, annualised returns, volatility of returns, Sharpe ratio, Sortino ratio, maximum drawdown etc helps you to better understand the backtest results. You can refer to this blog for analyzing the performance of the trading strategy, interpreting and analysing backtesting results.
I hope this helps!